A Housing Rescue in the Works?

After months at an impasse, President Bush and congressional Democrats begin negotiating.

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It was only last month that Treasury Secretary Paulson steadfastly rejected the government-funded housing rescue plans being kicked around by lawmakers, economists, and community groups, telling the Wall Street Journal: "I don't think I've seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars."

But after the recent implosion of Bear Stearns and continued turmoil in the credit markets, it seems the Treasury Department has softened its position:

From today's Wall Street Journal:

WASHINGTON—The Bush administration and congressional Democrats have begun negotiations over a plan designed to stave off hundreds of thousands of home foreclosures.

After months of stalemate—and a week of financial turmoil sparked in part by the housing crisis—the White House signaled yesterday that President Bush is open to compromise with Democrats, who want more federal action. Rep. Barney Frank (D., Mass.) said his aides are holding discussions with Treasury Department officials.

The Bush administration's position:

White House spokesman Tony Fratto said if Congress comes up with "some things we think are effective and won't cause greater problems down the road, then those are things that we'll consider and the president will be willing to consider." Mr. Fratto said the White House won't "get into public negotiating over what those items might be."

The White House's position represents a shift in tone. For weeks, the president and his economic team, led by Treasury Secretary Henry Paulson, have rejected proposals that would have further exposed the government to the housing market. As recently as the end of last month, Mr. Paulson said, "I don't think I've seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars." He predicted at the time that the administration's approach, which centers on a voluntary program by the mortgage industry to ease terms for troubled borrowers, would be sufficient to address the crisis.

Full story is here.